Dow Falls Below 7,000 For First Time Since 1997

[Bouncer]

The Dow Jones industrial average opened below 7,000 for the first time in 12 years this morning following news that government will invest another $30 billion in insurance giant AIG after it posted the largest quarterly losses in corporate history.

The Dow plummeted 93 points, or 1.3 percent, to 6,969 about 24 minutes into trading -- a level not seen since 1997. The Standard & Poor's 500-stock index fell 1.4 percent, or about 10 points, while the tech-have Nasdaq fell .5 percent, or 7 points.

Full Story: Dow Falls Below 7,000 For First Time Since 1997 - washingtonpost.com

[NewbieChris]

:hmm:

[curtus e flush]

Again why not cut some nice checks out for the middle class....Checks must be used for important things pay off bills...buy a new car....fuck giving these huge companies the money

[SonofBone]

looks like it may have a ways to go too...

How Low Can the Market Go: Tech Ticker, Yahoo! Finance

UPDATE: At the close, the Dow fell 299.64 points, or 4.2 percent to 6,763.29, while the Standard & Poor’s 500-stock index dropped 34.27 points or 4.6 percent, to 700.82. The Nasdaq fell 3.9 percent or 54.99 points to 1,322.85.

On days like today, it helps to look at the silver lining. Here it is: The farther stocks fall, the cheaper they get--and the higher the expected long-term return becomes. Unfortunately, that doesn't mean we don't have a long way to go on the downside.

There were four massive stock bubbles in the 20th Century: 1901, 1929, 1966, and 2000. During each of these bubble peaks, the S&P 500 neared or exceeded 25X on professor Robert Shiller's cyclically adjusted P/E ratio.* After the first three of these peaks, the S&P 500 PE did not bottom until it hit 5X-8X. We're still in the middle of the last one.

The most recent bubble peak, 2000, was by far the most extreme we have ever experienced. In 2000, the S&P 500 by prof. Shiller's measure exceeded 40X (it had never before exceeded 30X). With the S&P 5000 hitting 700 today, the PE has now fallen back to 12X. (See chart above.)

Three major bubbles are not enough historical precedent to confidently conclude where the S&P 500 will bottom this time around, but it seems reasonable to conclude that the trough will be in line with--or below--the preceeding lows (Given that we just had the highest peak in history by a mile, it doesn't seem absurd to think that we might be headed for the lowest trough in history by a mile.)

So where are we now?

Based on Professor Shiller's latest numbers, we're at about a 12X P/E. (Prof. Shiller's last update was at 805 on the S&P 500, which produced a 14X P/E. Plugging in today's 700 on the same earnings number, we get about a 12X P/E). The 12X PE compares favorably to the long-term arithmetic average of 16X, but it's still way above the historical troughs of 5X-8X.

So where would the S&P bottom if we hit the previous trough PE lows? It depends how we get there.

If the stock market stops falling and earnings eventually begin to grow again, we would be close to the bottom: The market could simply move sideways for 5-10 years while earnings growth gradually reduced the PE to the 5X-8X range. This is what happened in the 1970s.

Alternatively, the market could just keep dropping, as it did in the early 1930s.

Using Professor Shiller's latest earnings data, here's where the numbers would fall out if the market just kept dropping and 10-year average earnings didn't grow from today's level:

P/E S&P 500 Level
10X 575
8X 460 (highest previous trough low)
7X 400 (average previous trough low)
6X 350
5X 300 (lowest previous trough low)

In short, if the S&P fell straight to the high-end of its previous trough range (8X PE, or 460), it would fall another 35% from today's level (700)

If the S&P fell straight to the low-end of its previous trough range (5X PE, or 300), it would fall another 55+% from today's level.

Here's hoping we don't set a new low on the downside.

[3v1lj03]

I know what B will say about this. But, I believe that the "Stimulus Package" is designed to implode the US economy and that is exactly what is happening. We were already in a bad way but then we add all this government debt and the amount of money the treasury is printing to pay for the new spending not to mention the fact that the Federal Government now owns almost 80% of Citi bank and a huge portion of some other banks as well as AIG now. Now the Chinese say they are not going to buy our Treasury bonds so the only way to get the money is print it. I think the new budget and the Stimulus package are a way to bring the US into line with the socialist western nations of Europe. I know I sound like NewbieChris here but from where I stand things look grim. I think the bottom is a long way down from here. I hope not But......

[NewbieChris]

I know what B will say about this. But, I believe that the "Stimulus Package" is designed to implode the US economy and that is exactly what is happening. We were already in a bad way but then we add all this government debt and the amount of money the treasury is printing to pay for the new spending not to mention the fact that the Federal Government now owns almost 80% of Citi bank and a huge portion of some other banks as well as AIG now. Now the Chinese say they are not going to buy our Treasury bonds so the only way to get the money is print it. I think the new budget and the Stimulus package are a way to bring the US into line with the socialist western nations of Europe. I know I sound like NewbieChris here but from where I stand things look grim. I think the bottom is a long way down from here. I hope not But......

Being and sounding intelligent is never something to make light of. President Obama has made it completely clear that he believes we need to move towards a less Capitalist regime. We are already a socialist country when you look at all the laws designed to 'protect' everyone from their own stupidity. The moment the President was elected we knew this would happen. The Republican administration was already doing it. The end all be all is that American politics is a swinging pendulum. Right now the mood of the people is that of protection.

What our government has failed at, and what Adam Smith believed was extremely important, is regulation and consequence assignment. Those are considered socialist traits to many Republicans...

[3v1lj03]

Being and sounding intelligent is never something to make light of. President Obama has made it completely clear that he believes we need to move towards a less Capitalist regime. We are already a socialist country when you look at all the laws designed to 'protect' everyone from their own stupidity. The moment the President was elected we knew this would happen. The Republican administration was already doing it. The end all be all is that American politics is a swinging pendulum. Right now the mood of the people is that of protection.

What our government has failed at, and what Adam Smith believed was extremely important, is regulation and consequence assignment. Those are considered socialist traits to many Republicans...

I agree and when people get hungry they will give all their freedom away. What was it Jefferson said something like "I would rather suffer the consequences of too little government then the oppression of too much government "that is not an exact quote I can't remember it exactly right now. I will look it up later.

[The_Grinder]

I'll add my two cents. I work in sales and its getting harder to get people to buy shit. Damit! That's it, that is all. :D

[babyblues]

Don't pay attention to the Dow. Unless you have money to invest, don't even bother worrying about it. You can make money if stock goes up as well as down. Besides, consumer spending only accounts for about 1/3 of the stock market. Mutual funds with $billions are the movers and shakers.

I hate that our government is giving more money to an institution that has managed itself with as little integrity as AIG only so they can turn around and pay that out to their executives as bonuses. For what?! That money isn't even being used the way it was supposed to be. Paulson was supposed to distribute a large portion of that "bailout" package to homeowners. But when it comes time to actually do that, nope, he would rather bail out institutions instead of individuals. What a crock.

And Newbiechris, enough of that crap about Republicans and Socialism. That's bullshit with a capital B, dude. Democrats have done more to stand in the way of regulation and accountability than anyone. Democrats have denied that there was a problem for a decade. Even Bill Clinton admitted as much. Not trying to pick on you personally, because both Republican and Democrat parties reek of corruption, but don't lay this at the feet of Republicans. That's just not the truth.

[3v1lj03]

Vote Republican:fufool:

I think it's time for a new party maybe we could start the common sense party. Or just vote for libritatians

[NewbieChris]

And Newbiechris, enough of that crap about Republicans and Socialism. That's bullshit with a capital B, dude. Democrats have done more to stand in the way of regulation and accountability than anyone. Democrats have denied that there was a problem for a decade. Even Bill Clinton admitted as much. Not trying to pick on you personally, because both Republican and Democrat parties reek of corruption, but don't lay this at the feet of Republicans. That's just not the truth.

I single out Republicans in the blame of anti-regulation because they will always crop up in a thread like this and blame Democrats for too much regulation..ie.e post Enron and say that is the problem. That is not true, real regulation is important and needed. Both parties are at fault, but Republicans more than ANYONE demonize regulation. That was the point of my comment.

[NewbieChris]

Or just vote for libritatians

:rofl:

[Bouncer]

fuck republicans and fuck democrats and fuck the rest of them too. bunch of cock sucken faggot fucks.

[Mr I]

fuck republicans and fuck democrats and fuck the rest of them too. bunch of cock sucken faggot fucks.

Just when everything is so balanced this is just the kind of leadership a country needs :rofl: tell it like it is

where was I up to with my mein kampf book again?

[NewbieChris]

fuck republicans and fuck democrats and fuck the rest of them too. bunch of cock sucken faggot fucks.

Dude, you can't move to California. I don't think you would fit in all that well.

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